Shafer v. Lambie, 71A03-9506-CV-206
| Decision Date | 09 July 1996 |
| Docket Number | No. 71A03-9506-CV-206,71A03-9506-CV-206 |
| Citation | 667 N.E.2d 226 |
| Parties | Garland SHAFER and Arlene Hudson, Appellants, v. Ralph A. LAMBIE and Crumstown Tavern, Inc., Appellees. |
| Court | Indiana Appellate Court |
Garland Shafer and Arlene Hudson appeal from the trial court's judgment in favor of Ralph A. Lambie and Crumstown Tavern, Inc. Shafer and Hudson present four issues for appellate review which we consolidate into three and restate as follows:
I. Whether Lambie's claim is barred by the statute of limitations.
II. Whether Lambie's claim is barred by the equitable doctrine of laches.
III. Whether Lambie is barred from receiving certain funds based upon admissions made during a pre-trial conference.
We remand.
The facts most favorable to the judgment reveal that in September 1975, Lambie and his uncle, Lewis E. Williams ("Williams"), executed a real estate contract, a security agreement, a bill of sale, and a promissory note for purchase of certain real estate which contained a restaurant and tavern operated as the Crumstown Tavern. Thereafter, Williams and Lambie fulfilled the necessary formalities and formed a corporation, Crumstown Tavern, Inc. Each owned a one-half share in the corporation including a 50/50 share of corporate stock. In exchange for his one-half ownership interest, Lambie agreed to work in the tavern as a bartender for one year and signed a promissory note for the balance of the purchase price.
Lambie and Williams jointly operated the tavern from October 1975 through September 1976. During that time, Lambie worked on a daily basis as a bartender. Thereafter, a dispute arose between the parties. Williams informed Lambie that he wanted to end their business relationship and approached Lambie about turning over his interest in the tavern. Lambie refused and from September 1976 through September 1982, Williams ran the business alone and did not pay Lambie for his interest in either the tavern or the corporation.
In September 1982, Michael and Beverly Wise (collectively "Wise") assumed control of the tavern. In early 1983, Williams, as sole stockholder and officer of Crumstown Tavern, Inc., signed an agreement and a contract of sale of the tavern to Wise. Both the agreement and the sale contact were backdated to September 1, 1982, when Wise assumed control of the tavern. In exchange for the property, Wise agreed to pay Williams $750.00 for 120 months for a total sales price plus interest of $90,000.
Williams died intestate in October 1987 and at the time of his death, Williams had received payments totaling $47,250 from Wise. In November 1987, Wise began making the monthly payments to Shafer and then to Hudson and Shafer, Williams' sisters, who, at the time, were aware of Lambie's interest in the tavern. From November 1987 through September 1989, Shafer and Hudson received $17,250 in payments from Wise.
In December 1988, Lambie filed a complaint against Wise and Shafer and Hudson, claiming that Williams' sale to Wise was fraudulent and sought the imposition of a constructive trust on the proceeds of the sale. 1 In July 1989, Crumstown Tavern, Inc. was dissolved by the Secretary of State for failure to file annual reports. A receiver was appointed in September 1989 who received Wise's monthly payments.
In February 1991, Wise filed a motion for summary judgment, claiming that Lambie's complaint was barred by the six-year statute of limitations under IC 34-1-2-1. The trial court denied the motion, finding that the applicable statute of limitations was ten years under IC 34-1-2-3. In June 1993, Shafer and Hudson filed a subsequent motion for summary judgment, again claiming that Lambie's claim was barred by the six-year statute of limitations which the trial court also denied. A bench trial was held in December 1994. 2
On February 21, 1995, the trial court entered extensive findings of fact and conclusions of law. The trial court determined that Lambie did not transfer his ownership interest in the real estate, business assets or corporate stock. Thus, as a fifty percent owner of Crumstown Tavern, Inc. at the time of its dissolution, Lambie was entitled to his share of the profits from the sale of the corporate assets, less payment of the corporate debts. The trial court further found that Williams, as a director and shareholder, had a fiduciary duty to Lambie, and that his sale of the corporate assets constituted constructive fraud. The trial court also determined that given their awareness of Lambie's interest, Shafer and Hudson's retention of payments from Wise constituted constructive fraud as well.
As a result, the trial court ordered as follows:
1. A constructive trust in favor of Plaintiff Ralph Lambie is hereby imposed upon all sums presently held in the escrow account of Receiver Dennis M. Brennan.
2. Receiver Dennis M. Brennan is ordered to transfer all sums presently held in the Receiver's escrow account, less the reasonable Receiver's fee of $1,428.00 to Ralph Lambie upon his receipt of this Judgment.
3. Ralph Lambie shall have and recover a money judgment in his favor in the amount of $17,250.00 plus prejudgment interest at 8% per annum from November 30, 1987 to this date in the amount of $9,977.59, for a total judgment of $27,227.59 against Defendants Garland Shafer and Arlene Hudson, with said Defendants being jointly and severally liable for the same.
* * * *
Lambie requested specific findings and conclusions of law. When a party has requested specific findings of fact and conclusions thereon pursuant to Ind. Trial Rule 52(A), the reviewing court cannot affirm the judgment on any legal basis; rather, this Court must determine whether the trial court's findings are sufficient to support the judgment. Vanderburgh County Board of Commissioners v. Rittenhouse, 575 N.E.2d 663, 665 (Ind.Ct.App.1991), trans. denied. In reviewing the judgment, we must first determine whether the evidence supports the findings and second, whether the findings support the judgment. Id. The judgment will be reversed only when clearly erroneous, i.e., when the judgment is unsupported by the findings of fact and conclusions entered on the findings. DeHaan v. DeHaan, 572 N.E.2d 1315, 1320 (Ind.Ct.App.1991), trans. denied. Findings of fact are clearly erroneous when the record lacks any evidence or reasonable inferences from the evidence to support them. Id. To determine whether the findings or judgment are clearly erroneous, we consider only the evidence favorable to the judgment and all reasonable inferences flowing therefrom, and we will not reweigh the evidence or assess witness credibility. Id.
Shafer 3 contends that the trial court erred in determining that Lambie's action for a constructive trust was not barred by the statute of limitations. Shafer argues that Lambie's action is based in fraud which is subject to a six-year statute of limitations. Lambie counters that actions for the imposition of a constructive trust are subject to a ten-year statute of limitations.
IND.CODE § 34-1-2-1 (1993) provides that all actions for relief against fraud shall be commenced within six years after the cause of action has accrued. A constructive trust is a fiction of equity, devised for the purpose of making equitable remedies available against one who through fraud or other wrongful means acquires property of another. Huff v. Biomet, Inc., 654 N.E.2d 830, 837 (Ind.Ct.App.1995). Thus, fraud, either actual or constructive, is a prerequisite to the imposition of a constructive trust. Id. As a result, constructive trusts are subject to the six-year statute of limitations for fraud. See Given v. Cappas, 486 N.E.2d 583, 592 (Ind.Ct.App.1985), trans. denied; Forth v. Forth, 409 N.E.2d 641, 643 (Ind.Ct.App.1980), reh. denied.
Without addressing this precedent, Lambie counters that the trial court was correct in determining that claims for constructive trusts fall within the ten-year "catchall" statute of limitations of IND.CODE § 34-1-2-3. He relies upon Taylor v. Calvert, 138 Ind. 67, 37 N.E. 531 (1894) for support.
In Taylor, a guardian acquired a note and mortgage on certain real estate to satisfy a debt owed by the mortgagor to the guardian's wards. This real estate was then sold in a sheriff's sale and the guardian acquired the certificate of purchase before the year of redemption expired. Id. at 69, 37 N.E. 531. The guardian did nothing to protect the purchase on behalf of his wards, and when the wards reached the age of majority, the guardian claimed title to the land in his own name. Id. The wards filed suit, seeking the deed be set aside, that they be allowed to redeem the sale, and that the mortgage be foreclosed. Id. at 80, 37 N.E. 531. Noting that a redemption action has a fifteen-year statute of limitations and that this was an action to enforce a constructive trust which grew out of a fiduciary relation, the court indicated that the wards' claim was subject to a fifteen-year statute of limitations. 4 Id. at 82, 37 N.E. 531. The court concluded that the fifteen-year statute would not begin to run until the guardian was discharged from his trust and began to claim title to himself adversely to the trust. Id.
Based upon Taylor, Lambie broadly states that the imposition of a constructive trust falls under the catchall statute and must be filed within ten years. However, since Taylor, this court has clarified the applicability of these differing statutes in the context of constructive trusts. In Ballard v. Drake's Estate, 103 Ind.App. 143, 5 N.E.2d 671, 675 (1937), the court set forth a rule governing which statute is applicable to claims for constructive trusts. The court instructed:
The statute which provides that actions for relief against frauds shall be brought within six years applies...
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